California faces another $8B budget gap

There is more bad news about the California budget mess. Lawmakers have a new crisis to deal with. It turns out they've got to scrounge-up another $8 billion... fast.

Just three weeks after Governor Arnold Schwarzenegger (R) of California signed the state budget, the spending plan is already bleeding red ink.

The nagging housing crisis, nearly two million Californians out of work, and cutbacks in consumer spending add up to another $8 billion deficit, according to new projections by the non-partisan Legislative Analyst.

"All the major taxes are down, but the personal income tax is down by considerably more," says Mac Taylor, from Legislative Analyst.

"This is a recession that is deep and severe and affecting state finances. California, obviously being the largest state in the nation, is going to have a larger share of the effects of the recession," says H.D. Palmer, from the California Department of Finance.

That will force legislative leaders back to the negotiating table to figure out how to balance the budget. Since it took more than 100 days to solve the previous $42 billion deficit, the last thing they want to do is revisit the issue, especially if it means taking out the ax again.

"The last few months of budget negotiations were absolutely torture. To have to cut programs that I know are vital to the quality of life for Californians is a very difficult thing to do," said Assembly Speaker Karen Bass (D) of Los Angeles.

The prospect of new cuts scares the education community. Public schools have already endured nearly $10 billion in cuts in the current budget. Thousands showed up at numerous rallies statewide for Pink Friday to call attention to the more than 26,000 layoff notices, or pink slips, teachers have received. The new deficit is grim news.

"I think what this means is that in districts all across the state, you're looking at making a lot of these layoff notices become permanent before the end of May," said Kevin Gordon, a public schools lobbyist.

Federal stimulus money includes nearly $5 billion for education in California, but that's unlikely to completely stave off any more cuts to schools.

The Legislative Analyst thinks he has a partial solution, but some critics call it a "shameless shell game." He suggests taking $3.5 billion out of the education budget to help close the deficit. Then when that stimulus money reserved for schools comes in, pay them back with that.